HC-KAR NC: 2026:KHC:7097 MFA No. 6064 of 2018 - 1 - IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 6TH DAY OF FEBRUARY, 2026 BEFORE THE HON'BLE MS. JUSTICE TARA VITASTA GANJU MISCELLANEOUS FIRST APPEAL NO. 6064 OF 2018 (WC) BETWEEN: THE NEW INDIA ASSURANCE CO LTD., NO 46, ARMENIAN STREET, CHENNAI, TAMIL NADU- 600001 REPRESENTED BY REGIONAL OFFICE, NO 2-B, UNITY BUILDING ANNEX, MISSION ROAD, BANGALORE- 560027 REPRESENTED BY ITS MANAGER …APPELLANT (BY SRI. RAVISHANKAR C R., ADVOCATE) AND: 1. SMT. SHANTHIDHARAMAN AGED ABOUT 45 YEARS W/O LATE DHARMAN 2. SRI KARTHIK D AGED ABOUT 25 YEARS S/O LATE DHARMAN, BOTH ARE R/AT NO. 22, 81ST STREET, 1ST BLOCK, SIVALINGAPURAM, KALAINGNAR KARUNANIDI NAGAR, CHENNAI, TAMI NADU- 600078 3. M/S UNIVERSAL TRADING COMPANY NO 112A, LORD SINHA ROAD, ELGIN, KOLKATA, WEST BENGAL- 700 071 REPRESENTED BY ITS MANAGER. …RESPONDENTS (BY SRI. A.M.SURYA PRAKASH., ADVOCATE FOR R1 AND R2- ABSENT; R3 SERVED) R HC-KAR NC: 2026:KHC:7097 MFA No. 6064 of 2018 - 2 - THIS MFA IS FILED U/S 30(1) OF THE EMPLOYEES COMPENSATION ACT, AGAINST THE JUDGMENT AND AWARD DATED 19/03/2018, PASSED IN ECA. NO.20/2017, ON THE FILE OF THE XXI ACMM & XXIII ADDITIONAL SMALL CAUSES JUDGE, (SCCH-25), BENGALURU, AWARDING COMPENSATION OF RS.6,92,760/- ALONG WITH INTEREST @ 12% P.A., FROM THE DATE OF ACCIDENT i.e., 03.08.2016 TILL ITS REALISATION. THIS APPEAL, COMING ON FOR HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MS. JUSTICE TARA VITASTA GANJU ORAL JUDGMENT 1. The present appeal seeks to challenge a Judgment and Award dated 19.03.2018, in ECA No.20/2017, passed by the learned Motor Accident Tribunal, Court of Small Causes, at Bengaluru (hereinafter referred to as ‘Impugned Award’). By the Impugned Award, the petition filed under Section 22 read with Section 4 of the Workmen's Compensation Act, 1923 (hereinafter referred to as “E.C. Act”) has been allowed and the compensation of Rs.6,92,760/- has been awarded in favour of the respondents No.1 and 2/claimants No.1 and 2. 2. None appears for the respondents No.1 and 2, despite service. The record also shows that the HC-KAR NC: 2026:KHC:7097 MFA No. 6064 of 2018 - 3 - respondents have not been appearing regularly. The respondents accordingly, are proceeded with ex-parte. 3. The brief facts are that the respondents No. 1 and 2 are the wife and the son respectively of one deceased Dharman. The deceased was employed with the respondent no.3 as a lorry driver to deliver the Three HGV Trailer Jeeps from Chennai to Faridabad. On 03.08.2016, the deceased was driving lorry bearing registration number TN-18-TC-0818 and when they reached near Anand Honda Show Room, NH-7, Attibele, they stopped on the Bangalore-Hosur road for having tea. At that time, the deceased discovered that there was a jam in the clutch of the vehicle and in order to clear the blockage, the deceased went under the vehicle. Unfortunately, the vehicle moved suddenly and ran over the deceased, as a result of which, the deceased was seriously injured and succumbed to his injuries at the hospital. HC-KAR NC: 2026:KHC:7097 MFA No. 6064 of 2018 - 4 - 4. It was the case of the claimants that the deceased was earning a sum of Rs.20,000/- per month and was contributing to the income of the family and after the accident, the respondents/claimants have been facing severe financial difficulties. Hence a claim petition was filed. 5. The matter was contested by the respondent/owner as well as the Appellant/Insurance Company before the learned Tribunal and several defences were raised. However, there was no dispute that the deceased was employed by the respondent no.3/owner. 6. On the basis of the pleadings of the parties, the learned Tribunal framed the following issues: “1. Whether the Petitioners prove that deceased Dharman was a Driver/employee under the Respondent No.2.? 2. Whether the Petitioners prove that, Sri. Dharman was in the course of and arising out employment under the Respondent No.2? 3. Whether the Petitioners are entitled for compensation? If so, what is the quantum and from whom? 4. What Order or Award?” HC-KAR NC: 2026:KHC:7097 MFA No. 6064 of 2018 - 5 - 7. The Learned Tribunal after examining the evidence of the parties awarded compensation in a sum of Rs.6,92,760/- along with interest at the rate of 12% from the date of accident i.e., from 03.08.2016 till its realisation. The learned Tribunal also held that the respondents No.1 and 2 are jointly and severally liable to pay the compensation. 8. Learned counsel for the appellant/Insurance Company submits that he is not challenging the quantum of the compensation awarded and his challenge is only on one aspect. He submits that the appellant/Insurance Company cannot be made jointly liable to pay the interest awarded by the learned Trial Court in terms of the contract between the appellant and respondent No.3/employer in terms of which, this amount is to be paid by the employer/respondent No.3. In this behalf, reliance is placed by learned counsel for the appellant/Insurance HC-KAR NC: 2026:KHC:7097 MFA No. 6064 of 2018 - 6 - Company on the following judgment of the Supreme Court as well as the Division Bench of this Court: i) The New India Assurance Co.,Ltd., v. Harshadbhai Amruth Bhai Modhiya and another1 ii) The Oriental Insurance Co., Ltd, v. Raju and Others.2 9. The substantial question of law that arises in the present case is: “Whether the Court below is justified in fixing the liability to pay interest on the compensation awarded on the appellant Insurance Company?” 10. The learned counsel for the appellant/Insurance Company has also taken us through the Insurance Policy (Workmen Compensation Policy), dated 26.07.2016, and its clauses to submit that the policy of insurance is a private policy and unlike the policies in the case of the Motor Vehicles Act, 1988, which provide for compulsory third party policies, this particular policy provides for an exclusion, wherein, the interest or penalty would not be 1 (2006) 5 SCC 192 2 1992 SCC OnLine Kar 294 HC-KAR NC: 2026:KHC:7097 MFA No. 6064 of 2018 - 7 - applicable to the account of the insurer, but to the owner of the policy. 11. This Court has examined the policy which forms part of contract between the appellant and respondent No.3. The policy, while being in the name of the respondent no. 3, does set out that, in the case of personal injury by accident or death arising out of the cause of employment, the insured shall be liable to pay for such injury under law, but subject to terms and exceptions contained herein the policy itself. The Policy also provides for an exclusion of the interest and penalty on any such claims. The relevant extract of the policy is set out below: "NOW THIS POLICY WITNESSETH that if any time during the period of insurance any employee in the insured's immediate service shall sustain personal injury by accident or disease arising out of and in the course of his employment by the insured in the Business and if the Insured shall be liable to pay compensation for such injury either under the Laws (s) set out in the Schedule or at Common Law then subject to the terms exception and conditions contained herein or endorsed hereon the Company will indemnify the Insured against all sums for which the insured shall be so liable and will in addition be responsible for all costs and HC-KAR NC: 2026:KHC:7097 MFA No. 6064 of 2018 - 8 - expenses incurred with its consent in defending any claim for such compensation. PROVIDED ALWAYS that in the event of any changes in the law(s) or the substitution of other legislation thereof this policy shall remain in force but the liability of the Company shall be limited to such sum as the Company would have been liable to pay if the Law (s) had remained unaltered. Law(s) 1. The Workmen's Compensation Act, 1923 and subsequent amendments of the said Act, prior to the date of the issue of Policy. 2. The Fatal Accidents Act, 1855. It is hereby understood and agreed that the Workmen's Compensation (Amendment) Acts, of 1959 (8 of 1959, and 1962 (64 of 1962) and 1976 (65 of 1976) and 1984 (22 of 1984) and 1995 (30 of 1995) and 2000 (46 of 2000) and deemed to be added to the Laws set out in the Schedule to the Policy. Provided that the Insurance granted hereunder is not extended to include: (i) any interest and/or penalty imposed on the Insured on account of his/her failure to comply with the requirements laid down under the W. C. Act. 1923 and (ii) any compensation payable on account of occupational diseases listed in part 'C' of schedule III of the W.C. Act, 1923” [Emphasis supplied] 12. The policies of this nature have been interpreted time and again by the Courts. The Supreme Court in the case of Harshadbhai Amrutbhai Modhiya's case, while interpreting this issue, has relied on a judgment of LR HC-KAR NC: 2026:KHC:7097 MFA No. 6064 of 2018 - 9 - Ferro Alloys Ltd.,3 as well as a judgment of PJ Narayan v. Union of India,4 to set out that, the liability including penalty and interest would not be paid for by the Insurance Company, but by the owner himself. The relevant extract of the judgment in the case of Harshadbhai Amrutbhai Modhiya's case5 is set out below: “14. By reason of the provisions of the Act, an employer is not statutorily liable to enter into a contract of insurance. Where, however, a contract of insurance is entered into by and between the employer and the insurer, the insurer shall be liable to indemnify the employer. The insurer, however, unlike under the provisions of the Motor Vehicles Act does not have a statutory liability. Section 17 of the Act does not provide for any restriction in the matter of contracting out by the employer vis-à-vis the insurer. 15. xxx xxx xxx 16. In Ved Prakash Garg [(1997) 8 SCC 1] this Court undoubtedly held that in terms of the contract of insurance entered into by and between the employer and the insurer under the provisions of the Motor Vehicles Act, 1988, which would also apply in a given case to the claim under the provisions of the Workmen's Compensation Act, the insurer would also be liable for payment of interest stating: (SCC p. 15, paras 12-13) “A conjoint reading of these provisions in the insurance policy shows that the insurance company 3 (2002) 9 SCC 450 4 (195) 1 SCC 142 5 (2006) 5 SCC 192 HC-KAR NC: 2026:KHC:7097 MFA No. 6064 of 2018 - 10 - insured the employer owners of the insured motor vehicles against all liabilities arising under the Workmen's Compensation Act for which statutory coverage was required under Section 95 of the Motor Vehicles Act, 1939 which is analogous to Section 147 of the present Motor Vehicles Act noted earlier. Section 149 deals with ‘Duty of insurers to satisfy judgments and awards against persons insured in respect of third-party risks.’ The moot question is whether the insurance coverage as available to the insured employer owners of the motor vehicles in relation to their liabilities under the Workmen's Compensation Act on account of motor accident injuries caused to their workmen would include additional statutory liability foisted on the insured employers under Section 4-A(3) of the Compensation Act. The question posed for our consideration is required to be resolved in the light of the aforesaid statutory schemes of the two interacting Acts. It is not in dispute and cannot be disputed that the respondent- insurance companies concerned will be statutorily as well as contractually liable to make good the claims for compensation arising out of the employers' liability computed as per the provisions of the Compensation Act. The short question is whether the phrase "liability arising under the Compensation Act" as employed by the proviso to sub-section (1) of Section 147 of the Motor Vehicles Act and as found in proviso to clause (i) of sub-section (1) of Section II of the insurance policy, would cover only the principal amount of compensation as computed by the Workmen's Commissioner under the Compensation Act and made payable by the insured employer or whether it could also include interest and penalty as imposed on the insured employer under contingencies contemplated by Section 4-A(3)(a) and (b) of the Compensation Act." 17. Yet again in L.R. Ferro Alloys Ltd. this Court opined that if an amount of compensation is not deposited within a period of one month, the insurance company HC-KAR NC: 2026:KHC:7097 MFA No. 6064 of 2018 - 11 - shall be liable to reimburse the owner only the amount of compensation with interest therefrom but not the penalty imposed on the insured employer for default of payment of amount stating: (SCC pp. 451-52. para 5) "5. The only contention put forth before us is that the entire liability including penalty and interest will have to be reimbursed by the insurance company and this aspect has not been examined by the learned Single Judge in the High Court and needs examination at our hands. In Ved Prakash Garg v. Premi Devi this Court after examining the entire scheme of the Act held that payment of interest and penalty are two distinct liabilities arising under the Act, while liability to pay interest is part and parcel of legal liability to pay compensation upon default of payment of that amount within one month. Therefore, claim for compensation along with interest will have to be made good jointly by the insurance company with the insured employer. But, so far as the penalty imposed on the insured employer is on account of his personal fault the insurance company cannot be made liable to reimburse the penalty imposed on the employer. Hence the compensation with interest is payable by the insurance company but not penalty. Following the said decision and for the reasons stated therein, we modify the order made by the High Court to that extent. The appeal is allowed in part accordingly." 18. We are, in this case, not concerned with a case where an accident has occurred by use of a motor vehicle in respect whereof the contract of insurance would be governed by the provisions of the Motor Vehicles Act. 1988. 19. As indicated hereinbefore, a contract of insurance is governed by the provisions of the Insurance Act. Unless the said contract is governed by the provisions HC-KAR NC: 2026:KHC:7097 MFA No. 6064 of 2018 - 12 - of a statute, the parties are free to enter into a contract as for their own volition. The Act does not contain a provision like Section 147 of the Motor Vehicles Act. Where a statute does not provide for a compulsory insurance or the extent thereof, it will bear repetition to state that the parties are free to choose their own terms of contract. In that view of the matter, contracting out, so far as reimbursement of amount of interest is concerned, in our opinion, is not prohibited by a statute. 20. The views taken by us find support from a recent judgment of this Court in P.J. Narayan v. Union of India wherein it was held: (SCC р. 200. para 1) "This writ petition is for the purposes of directing the insurance company to delete the clause in the insurance policy which provides that in cases of compensation under the Workmen's Compensation Act, 1923, the insurance company will not be liable to pay interest. We see no substance in the writ petition. There is no statutory liability on the insurance company. The statutory liability under the Workmen's Compensation Act is on the employer. An insurance is a matter of contract between the insurance company and the insured. It is always open to the insurance company to refuse to insure. Similarly, they are entitled to provide by contract that they will not take on liability for interest. In the absence of any statute to that effect, insurance companies cannot be forced by courts to take on liabilities which they do not want to take on. The writ petition is dismissed. No-order-as-to costs." [Emphasis supplied] 13. The Division Bench of this Court in the Raju's case, has taken a similar view. The relevant paragraphs are set out below: HC-KAR NC: 2026:KHC:7097 MFA No. 6064 of 2018 - 13 - “4. On a careful consideration of the award as well as the coverage found in the policy issued under the Act in favour of the insured, it is seen that the liability of indemnifying the insured as to imposition of interest of penalty is expressly excluded. The last sentence of the condition imposed reads as follows:— “It is hereby understood and agreed that the cover provided under the policy shall not extend to indemnify the Insured/Insureds in respects of any interest and/or penalty which may be imposed on him/them on account of his/their failure to comply with the requirements laid down under the Workmen's Compensation Act, 1923 and subsequent amendments of the said Act.” 6. The submission is, that so long as there is a contract between the parties, the insurer undertakes only to indemnify compensation that may be awardable in favour of a workman in the event of his being injured or his death. In the instant case, the submission is that when there is a condition by which the liability of the insurer is excluded as to the payment of interest awardable, the Commissioner ought not to have imposed interest on the amount determined as compensation. Sri Shankar, learned Counsel for appellant also brought to our notice the view taken by this Court in a similar matter arising in M.F.A. No. 1626 of 1987* disposed of on 31st October, 1988. It is seen from a perusal of the Judgment of the Division Bench that referring to the material terms of the policy, it was held that the insurer cannot be made liable to pay interest and penalty on the compensation which may be fixed for the death or injury of the employee whose risk is insured. Thus, the Division Bench held in that appeal that it was an error on the part of the Commissioner to have fixed liability on the insurer respecting the interest and penalty payable by the insurer as compensation to his employer. Thus the appeal of the insurer came to be allowed setting aside the imposition of penalty and interest imposed on them.” [Emphasis supplied] HC-KAR NC: 2026:KHC:7097 MFA No. 6064 of 2018 - 14 - 14. It is not in dispute that the deceased died during the course of his employment and that he is liable to be paid compensation by the appellant-Insurance company. However, the challenge is only on the payment of interest thereon. 15. In view of the settled position of law, this Court modifies the judgment and decree passed by the learned Tribunal in the following manner: (i) The award of compensation of Rs.6,92,760/- along with interest from 03.08.2016 till realisation is not disturbed. (ii) The liability for the principal amount of Rs.6,92,760/-, however, shall be on the appellant/Insurance Company, while the liability for the interest of 12% p.a. thereon shall be on the respondent no.3/ employer. (iii) Let a decree be drawn up in terms of the modified award. HC-KAR NC: 2026:KHC:7097 MFA No. 6064 of 2018 - 15 - (iv) The respondent No.3 shall deposit the amounts payable as interest at 12% p.a. on the compensation amount within 8 weeks from today. (v) The Registry is directed to ensure that a copy of the judgment passed today is sent to each of the respondents by registered mail/speed post. (vi) The appellant/Insurance Company shall file an appropriate application before the Tribunal to withdraw the excess amounts deposited, in terms of the judgment passed by this Court. 16. The appeal is disposed of in the aforegoing terms. All pending applications stand closed. Sd/- (TARA VITASTA GANJU) JUDGE HR/BMV* List No.: 1 Sl No.: 23 Digitally signed by TARA VITASTA GANJU Location: HIGH COURT OF KARNTAKA